Judge denies bid to delay Forest City shareholder vote

Forest City HQ Vocon 2018

Employees walk through the lobby of Forest City Realty Trust, Inc.'s new headquarters at Key Tower in downtown Cleveland. The company's shareholders will vote Thursday on the sale of the company to an affiliate of Brookfield Asset Management.
(Vocon)

On Wednesday afternoon, U.S. District Court Judge Christopher Boyko denied Albert Ratner's motion for a temporary restraining order to prevent Forest City from holding a special shareholder meeting this week. Stockholders are set to weigh in on the proposed sale of the Cleveland-based company to an affiliate of Brookfield Asset Management of Toronto.

In a three-page order, Boyko wrote that Ratner, a 90-year-old former chief executive, shareholder and member of the company's founding family, failed to prove his case for urgent action. Ratner filed his lawsuit late Monday, alleging that Forest City didn't provide shareholders with complete and accurate information about the Brookfield deal and the process that led to it.

He had asked the judge to push off the special meeting and vote until 30 days after Forest City mailed out a corrected proxy statement to shareholders.

Following a Wednesday morning conference with attorneys for both sides, Boyko determined that Ratner didn't prove he has a strong likelihood of success or that allowing the vote to happen Thursday will cause irreparable harm.

The judge will issue a more-detailed opinion at a later date. But the immediate question - the one that was causing consternation at Forest City's headquarters downtown and in the offices of Wall Street analysts and onlookers - is settled.

The potential sale deal was announced in late July and, if approved, will occur late this year. Brookfield offered to pay $25.35 per share for Forest City, whose board was deeply divided, seven-to-five, on whether to proceed with the transaction.

Some institutional shareholders have signaled their support for the deal. At least two members of the founding family - Albert and James Ratner - plan to oppose it. Members of the Ratner, Miller and Shafran families and their heirs control roughly 10 percent of the publicly traded company's stock, Albert Ratner said.

In late October, he sent the first in a series of open letters urging shareholders to reject Brookfield's offer. In addition to criticizing Forest City's disclosures, Albert Ratner has described the deal as coming at the wrong price, at the wrong time and as the result of the wrong process. His mounting frustration drove him to appeal to the court this week.

In a brief filed Wednesday morning, before the judge's decision to allow the vote to proceed, attorneys for Forest City described the lawsuit as "eleventh-hour, fire-drill litigation." They said pushing off the special shareholder meeting would cause significant damage.

"A judicial order enjoining the vote would create substantial uncertainty that could threaten the $6.9 billion transaction, destabilize the company's stock price and impose harm on thousands of third-party public stockholders," the lawyers wrote.

Albert Ratner could not immediately be reached for comment on the court's order.